Newedge metals woes deepen as senior brokers exit

Josephine Mason

4 IN. DI LETTURA

NEW YORK (Reuters) - Three senior metals dealers at Newedge Group have resigned following the departure of the global metals chief, dealing a blow to the commodities business of one of the world’s largest brokers.

Joel Spier, head of metals for the Americas, and John Peiser, a senior director, in New York left the company on Tuesday, a Newedge official told Reuters on Wednesday, just days after the surprise resignation of global metals chief Mike Frawley.

In London, where the broker is one of dozen ring dealing member of the London Metal Exchange, Steve Pettitt, head of Europe, Middle East and Africa, handed in his resignation, although he has agreed to work out his notice and was still working on Tuesday, according to industry sources.

A spokeswoman for Newedge, a joint venture created in 2008 between two of France’s largest banks, Credit Agricole CIB CRAGO.UL and Societe Generale (SOGN.PA), had no comment on the resignations.

The reasons for their departure and the impact on Newedge’s metals strategy remained unclear on Wednesday. The spokeswoman said it was business as usual.

John Fay, global head of fixed income, currencies and commodities (FICC) with a background in electronic trading, assumed Frawley’s responsibilities last week.

Newedge has an estimated 12.1 percent market share for execution and clearing on global-listed derivatives exchanges, according to its website.

Even so, losing four senior members of the metals team has come at an already tough time for the broker’s co-owners as French banks try to cut their exposure to dollar financing, reduce debt and boost their capital ratios amid concern about the euro-zone debt crisis.

Brokers have reined in customer credit lines to shore up capital reserves, making it more difficult to do business, market sources have told Reuters.

“To set up a credit facility is so expensive. Interest rates are not high, but the capital requirements of doing business are,” a senior executive at one of Newedge’s smaller rivals told Reuters recently.

This is the second shake-up of one of the LME’s ring dealing members in the last month, coming on the heels of fellow French bank Natixis’ decision to shut its commodities brokerage division.

Competition among brokers is intense too, with commercial hedgers from scrap merchants to grain elevators in the Midwest less active in the market after MF Global’s October collapse, pressuring commission and execution fees.

“It’s a difficult time to be an FCM (futures commission merchant). Fees have bottomed out. There is zero float with institutions carrying minimum margins,” said Sean McGillivray, vice president and head of asset allocation for Great Pacific Wealth Management in Oregon.

Adding to the industry uncertainty, SocGen has been looking for a buyer for its stake in the venture for at least the last nine months.

The traders’ plans are not known. A customer of the firm, who also confirmed Spier’s departure, said he expected him to follow his former boss Frawley, who market sources said would be joining Jefferies Bache JEF.N, a Category II clearing member of the LME.

Pettitt, who also serves on the LME ring dealers committee, and Peiser had each worked for Newedge and its various guises for more than 10 years. Spier joined in 2005 from AIG.